Carbonite famously dropped Rush Limbaugh on a Saturday Night at the height of the Sandra Fluke controversy. Carbonite became the poster child for the Rush boycott movement organized by Media Matters, which coordinated the effort with so-called independent groups.

At the time I examined Carbonite’s SEC filings, and how Carbonite had built its business model based on high growth driven, in significant part, by the promotion of Carbonite by Limbaugh. I predicted that Carbonite had shot itself in the foot, and put political correctness before the interests of its shareholders.

Since that time the Stop Rush effort has imploded, with backstabbing and accusations among the participants. Limbaugh has had better numbers than ever, and the hype surrounding Mike Huckabee as a Limbaugh replacement has gone flat.

Yet what became of Carbonite?

On August 1 Carbonite released its 2d Quarter 2012 results, the first full quarter after dropping Limbaugh in March. The results shocked Wall Street, as Carbonite did not meet its growth targets, causing multiple analysts to drop the target price. The stock dropped 15% in a day. (h/t reader W)

Most important, in a conference call held on August 1, the CEO David Friend admitted that dropping Limbaugh damaged Carbonite’s growth, and is likely to do so for at least one or two more quarters.

The full audio is available here. The key passage is embedded below. (Transcription mine, official transcript not available yet)

(3:10) CEO Friend: “There were four factor that contributed to this slower growth. First, in March we stopped working with one of our top producing radio endorsers. While we recently contracted with three new radio personalities, it takes 3-6 months to ramp up new radio hosts so we probably won’t see the full effect of this for another quarter or two.”

(24:15) Q: “I guess I’m a little surprised that you were caught by surprise by the radio host change ’cause I know we’ve talked and I guess my impression was that it wouldn’t be that impactful but I guess it was quite impactful.

CEO Friend: “Yeah, I’d say it turned out to be a bigger issue than we had anticipated. Because you know at the time there was a lot of noise, I mean we had a huge spike in web traffic around that time just because of all the interest in the whole subject. And it took close to a month for that to sort of die down. And meanwhile our metrics were, we really couldn’t see what was going because there was so much noise around the website that we had no idea what the ultimate impact was going to be. It turned out to be a bigger hole in our revenue than we had thought when we initially did this. However, I don’t think there was any, I’m not regretful of the decision, I think things would have been worse had we not done that.

(added) The analyst asking the question indicates that Friend previously had indicated in private conversations that there would not be a substantial impact. This demonstrates how Friend misjudged the situation. Additionally, Friend says the “metrics” could not be known for a month after dropping Limbaugh and that Carbonite had no way of judging the impact. Yet I don’t recall any statements from Carbonite reflecting the disarray in its ability to measure its own business model.

The last statement by Friend, that the damage would have been worse had Carbonite not dropped Limbaugh is laughable. Friend has been caught doing serious damage to shareholders based on a political decision which was taken precipitously on a Saturday night. It’s too convenient now to say things would have been worse, when Friend completely misjudged the impact of dropping Limbaugh.

Update: Carbonite shareholders have another reason to worry. Friend has just started a potentialy competitive online storage company with a recently departed executive.

HuffPo picked up on this post, and emphasizes Friend’s claim that things would have been worse. Interesting that some HuffPo commenters are not buying that line.

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I have never been able to understand why corporate America is so willing to chase after the business of the far left and the GLBTG community. It is a small market and they risk ticking off more customers than they will gain. I think we need to do far more to point out that while the left boycotts we are loyal and buycott.

The Left has been successful in astroturfing fake displays of outrage. They make it look like a groundswell of popular rage.

I don’t know if these “savvy corp executives” are truly fooled or if they look for excuses to embrace PC attitudes they hold themselves. I hope they look with clear eyes and compare the “kiss in” versus the CfA day of support and do some honest counting.

Gotten worse if he didn’t do anything? Really? The company chose to advertise on Rush because of his demographic, not because he attracted the Air America crowd. How would it have gotten worse? Do they know every customer who didn’t sign up because they chose to stand pat and not get involved in the controversy.

Yeah, worse HOW ? Clearly nobody is upset enough to really do a thing about it or Rush would be suffering the consequences. Pretty ridiculous to think the radio personality himself would not suffer, but his sponsors would ?! Doesn’t work that way.

Further, I don’t believe the “chicken guy” went after anyone or brought this on himself. Was this whole thing not caused by the dim bulb mayors of Bean Town and the Windy City going after him, as opposed to the Carbonte fool who thought he’d show everyone what an insider and savvy observer of society he is? And now, it’s apparent he still hasn’t learned. Customers and shareholders should hope he applies better criteria to his IT staff and hires than he does to his marketing and business strategy folks. (Hint, buy an external HD, mirror your computer-keep it in the shed if that makes you feel better-and spend the savings on something nice for yourself.)

“Yeah, I’d say it turned out to be a bigger issue than we had anticipated. Because you know at the time there was a lot of noise, I mean we had a huge spike in web traffic around that time just because of all the interest in the whole subject. And it took close to a month for that to sort of die down. And meanwhile our metrics were, we really couldn’t see what was going because there was so much noise around the website that we had no idea what the ultimate impact was going to be.”

What an idiot. He lacks the “metrics” to be a CEO. I’d sell my stock in the company basd on this statement alone.

My impression of the Wall Street numbers has been it is a tug of war between the regular Wall Street types and the Carbonite types. How can it be that by the Fed flushing worthless money into the system it is a factor in driving the market up. In a sane market not driven by immediate gratification that would be seen for what it is.

In the 1960’s, a book was published entitled “Games People Play”. The title fairly much states it, although the games are not sports, but psychological.

One of them is called “Now I’ve Got You, You SOB” (SOB is short for . . .). Basically, this one is about what happens when a mistake, weakness, etc. is discovered by one person concerning another. It is, as I recall, the disproportionate reaction that is the characteristic of this “game”.

For exmaple, you broke my favorite fishing rod. I broke a pencil. You go off, endless, about my carlessness, disregard, or whatever the case might be about the pencil. Of course, the matter of the fishing rod is in the distant background.

It seems that increasingly there exists in our society this propensity to play NIGYYSOB, frequently fanned by the media. The Limbaugh/Flack, I think, is one such example. Another I believe to be is the situation with Penn State and the reaction to the scandal of sexual abuse. Still another is the game Obama and his team are playing with regard to Romney and Bain. If anybody ought to be playing NIGYYSOB, it ought to be the American people with regards to Obama and the economy.

yeah, it would seem this would be the gift that keeps on giving till next March. Those with longer contracts will continue to drop of as their term expires.

But all those supposed new leftist activists that made so much noise, apparently did not show up with cash, to replace the angered conservative customer base. If they had, the income would have been “front-loaded” since the plans are annual, and would have shown up already.

“there was noise, so much noise, we had no clue that pissing on our clients’ beliefs, that we paid a lot of money to win, was a bad move.

“it would seem this would be the gift that keeps on giving till next March. Those with longer contracts will continue to drop of as their term expires.”

Exactly Midwest Rhino. My account expired in July. As this issue was boiling over in March, I was already considering other vendors as the Carbonite software never played well with my laptop. When Friend made his infamous Saturday night decision, I found a new vendor, uploaded my data and de-installed Carbonite a few days later. Knowing that in 30 days my data would auto-delete from Carbonite, as tempting as it was to email or call Carbonite and gloat, I’d only be hurting the feelings of a rank and file employee who was already terrified for their job. I suspected there were many others who aren’t inclined to gloat and Friend had no idea how bad his retention problem would be.

Also, I was on their Facebook page the Saturday morning that the Stop Rush online flash mob hit their page with threats such as “I’ll never support Carbonite again.” I feared that Friend would believe those empty threats. After he caved, a lot of disappointed Conservatives made statements to the effect that they had just renewed months before and wished they hadn’t. I don’t think Friend’s problems are close to being over. They’re just beginning.

I also have about a year left (I bought 3 years). Carbonite burps every once in a while (takes a little long to back up files – maybe 12 hours). You betcha I am on the phone to customer support to find out what is wrong. Any semblance of profit they got from me has been consumed in their costs. I am more expensive to them staying, than if they allowed me to chop out of the three year deal, and pro rate my refund (which I offered).

Even though you may be only talking to a first level sale rep, it seems Mr. Friend needs help in his metrics, and a way to do that is call them and tell them why you are leaving.

“Because you know at the time there was a lot of noise, I mean we had a huge spike in web traffic around that time just because of all the interest in the whole subject.”

The left draws attention by being loud and obnoxious, each one making as much noise as 10 conservatives. They are actually only about 12% of the population, so from the noise the population seems to be about 60% left and 40% conservative.

He still had ~850,000 shares remaining, as of May 30. Down from ~946,000 on April 2.

So Friend will do his song and dance about how new advertisers take time to produce. Sing it David … ♫ “The sun will come out, tomorrow, bet your bottom dollar on tomorrow, come what may, (cuz I’m selling mine fast and furious, suckers) ♫

Carbonite is learning the real life meaning of “Politically Correct,” not the liberal’s definition of that term.

In my view, as a successful former company founder & president, this shall be known as the Carbonite Effect as opposed to the Chick-Fil-A Effect.

The term “Politically Correct” for businesses is the correct business decision in a Consumer Market by gauging the ratio of political *clout* on the bottom line, as opposed to mere noise of Leftists Activists.

Bottom line, Carbonite made a emotional fear-based political decision, not a business decision.

Now the results of liberal activist noise, verses consumer clout, are being weighed and measured, and found wanting.

Advertizing on Limbaugh was a good decision.

Caving in to emotional noise by Liberal Political Activists was a bad business decision.

[…] William A. Jacobson at Legal Insurrection (always a great blog!) has a follow up on Carbonite. We saw how marketplace ballots worked this week. Whether you boycott, or buycott, whether you support a company that stands FOR your principles or decide not to patronize a company that supports an agenda you disagree with … politics and money and the will of the people can sometimes merge with impactful results. […]